European stocks tumbled, sending the Dow Jones Stoxx 600 Index to its steepest drop since 1987, as the yearlong credit market seizure caused bank bailouts to spread and oil's slump dragged down commodities producers.
Hypo Real Estate Holding AG sank 37% after the German government and state banks were forced to pledge $US68 billion ($95 billion) to rescue the commercial-property lender. BNP Paribas SA slipped 5.4% after saying said it will take control of Fortis in Belgium and Luxembourg, while UBS AG lost 13%. BHP Billiton Ltd. and Rio Tinto Group fell more than 9.9%, leading the biggest slide in raw-materials producers since at least 1986, on concern slower global growth will curb demand for crude and metals.
The Stoxx 600 sank 7.6% to 241.60, the largest retreat since the stock market crash in October 1987, with only four stocks advancing. Europe's plunge helped erase about $US2.5 trillion from global equities as investors disregarded the US Treasury plan to revive credit markets with a $US700 billion bank bailout.
``So far it's been a like a fire-fighting operation,'' said Robert Talbut, chief investment officer at Royal London Asset Management, which oversees about $US63 billion. ``Markets are reacting to the fact that this whole credit and banking crisis is escalating. Policy makers need to understand that they don't have weeks to make up their minds, they have days or even hours.''
The SXXP 600 tumbled 34% this year as bailouts of financial companies worldwide accelerated and bank credit losses and writedowns approached $US600 billion. The index trades at 10.1 times earnings, the lowest since at least 2002.
National indexes
All 18 western European benchmark indexes except Iceland declined more than 5%. The UK's FTSE 100 decreased 7.9% and France's CAC 40 slid 9%, their steepest retreats since October 1987, as Royal Bank of Scotland Group Plc and Dexia SA fell more than 20%.
Iceland's ICEX 15 lost 2.1% as banks including Kaupthing Bank hf were suspended from trading.
The euro slid the most against the yen since its debut and oil dropped below $US90 a barrel. Government bonds rallied.
``We're seeing panic all over the markets right now,'' said Javier Barrio, head of equity sales for Spanish clients at Banco BPI SA in Madrid. ``Governments are taking steps to try to reduce investors' fears but confidence is weak.''
Merkel, Darling, Bush
German Chancellor Angela Merkel said the government will guarantee savings of private account holders to prevent a rush of withdrawals from the nation's banking system.
UK Chancellor of the Exchequer Alistair Darling said Britain is ``ready to do whatever it takes'' to help its banks, while Denmark said commercial lenders will provide as much as 35 billion kroner ($US6.4 billion) over the next two years to a fund to insure depositors against losses.
US President George W. Bush last week signed a $US700 billion rescue package into law to stem a banking crisis that has claimed Bear Stearns Cos. and Lehman Brothers Holdings Inc.
The Federal Reserve said today it ``stands ready'' to foster ``liquid money market conditions.''
BHP Billiton, the world's largest mining company, sank 9.9% to 1,070 pence. Rio Tinto Group, the third-biggest, slipped 15% to 2,888 pence.
Royal Dutch Shell Plc, Europe's biggest oil company, dropped 7.7% to 1,502 pence.
Oil, Copper
Crude oil fell for a fourth day in New York, dropping as much as 5.3% to $US88.89 a barrel. Copper tumbled the most in more than a year to the lowest since February 2007 on concern that the deepening credit crisis will stifle global growth and reduce metals demand.
ArcelorMittal, the world's biggest steelmaker, lost 15% to 28.30 euros. Chief Executive Officer Lakshmi Mittal said the global steel market is in an ``unprecedented situation'' as the credit crisis hurts demand.
There is no ``visibility'' in the industry because of the crisis, Mittal said at a conference in Washington, D.C.
UBS, the European bank worst hit by credit crisis, lost 13% to 20.9 francs. The bank may write down $US3.1 billion in the third quarter, Oppenheimer & Co. analyst Meredith Whitney wrote in a note to clients. The Swiss bank has posted $US44 billion in losses, according to data compiled by Bloomberg.
Hypo Real Estate
Hypo Real Estate plunged 37% to 4.70 euros. The German government and the country's banks and insurers agreed on a 50 billion-euro ($US68 billion) rescue package for the commercial property lender after an earlier bailout faltered.
BNP Paribas dropped 5.4% to 67.50 euros after France's biggest bank agreed to take control of Fortis in Belgium and Luxembourg for 14.5 billion euros after an earlier government rescue failed to ensure the company's stability.
Daimler AG sank 15% to 27.20 euros and Bayerische Motoren Werke AG lost 4.5% to 24.72 euros. Exane BNP Paribas analysts reduced their earnings estimates for European auto companies by an average of 10% this year and 14% next year and advised clients to ``stay away from the sector'' until managements start providing ``more realistic forecasts.''
IVG Immobilien AG sank 16% to 5.37 euros after UBS lowered its recommendation for Germany's largest commercial property company to ``neutral'' from ``buy,'' saying the company may cut its dividend.
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